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Documents released as part of its IPO provide a road map for how the company will, legally, be able to shrink its tax bill and highlights some of the policies lawmakers say have made the tax code a muddle of special preferences.

Like many emerging tech companies, Twitter has yet to earn a profit. But even if it does, Twitter will have a ways to go before owing taxes, in part, because it can take advantage of a tax deduction for stock options granted to executives and other employees that some call the “stock option loophole.”

Twitter’s securities filings show that as of Dec. 31, 2012, the company racked up $106.6 million in “net operating loss carry forwards” attributable to employee stock option deductions.

“What Twitter is telling you is, while they obviously haven’t reported profits, when they do start earning profits they are going to be able to zero out tax on quite a bit,” said Matt Gardner, executive director at the liberal-leaning Institute on Taxation and Economic Policy.

A Twitter official said the company could not comment because it is in a “quiet period” in the run-up to its IPO.

The use of losses to offset future tax liabilities is common and legal, but the tax write-off from stock option grants is more controversial. Companies, including Facebook and JPMorganChase, benefit from the practice.

Critics say the deductions are unjustified because executives and other employees typically are offered the option to buy shares at a low price in the future. When the employee exercises the option, the company can deduct the difference between what the employer paid and what the stock is worth at current market price.

Sens. Carl Levin (D-Mich) and John McCain (R-Ariz.) back legislation that would require that these corporate deductions not exceed the actual expense taken, though it has failed to gain traction in a bitterly divided Congress. They also want a cap of $1 million per executive for the deductions.

Twitter CEO Richard Costolo earned a $200,000 salary last year, but his overall compensation was about $11.5 million including stock and option grants.

Not everyone thinks the stock option breaks are a tax loophole, because the employee includes the value of the benefit in their income, meaning the government doesn’t technically lose any money.

“So long as the employee includes the value of the option as income at the same time, the deduction is appropriate,” said Victor Fleischer, a law professor at the University of San Diego who frequently sides with Democrats on tax issues.

“It looks bad because the company takes a smaller expense, much earlier, for accounting purposes,” Fleischer said.

Twitter is also holding earnings offshore. Companies can defer taxes on most income held abroad until they bring the funds back to the U.S., normally in the form of a dividend.

Twitter uses this tax benefit to a small degree, holding $2.5 million in undistributed earnings “permanently reinvested” in foreign units, but it highlights a growing practice among bigger companies like Cisco that keep billions offshore, in large part to avoid federal taxes.

Much of corporate America says the trend will continue as long as the United States keeps the highest statutory corporate tax rate among industrialized countries, topping out at a 35 percent rate. Many companies pay a lot more and many pay far less, due to the Swiss cheese nature of the U.S. tax code.

Republicans and some Democrats sympathize with companies holding cash offshore and want a tax holiday known as repatriation, giving them a lower tax rate to spur companies to bring the money back.

But most Democrats and President Barack Obama say that past efforts did not produce promised economic activity.

One tax break Twitter uses that enjoys bipartisan support may be in jeopardy in future years because of gridlock in Congress over renewing certain tax breaks that are set to expire.

Many Republicans and Obama both back extending and even expanding the federal research and development tax credit, which costs the government billions of dollars in lost revenue annually.

But the R&D credit must be renewed every year as part of a group of “tax extenders,” that are not likely to be taken up this year as lawmakers attempt a tax code rewrite.

The credit and other breaks in the package could very well be renewed retroactively next year, as they have in many past years.

On the local level, Twitter is getting a major tax break from the city of San Francisco, a cut in payroll taxes for locating in an up-and-coming neighborhood.

Local tax accountant Jim McHale has estimated the city could lose $56 million in revenue over the break’s six year period, greater than originally estimated in large part due to stock options.